STRENGTHS

Political, economic and social stability and consensus; role of direct democracy

Close relations with the EU

Limited sensitivity of exports to foreign exchange due to focus on high technology and quality

Public accounts in surplus and large external asset position

European crossroads with excellent communication network

WEAKNESSES

Small, open and landlocked economy

Overvalued Swiss franc used as a safe haven

Highly dependent on trading and financial services

Elevated house prices

Banks’ exposure to real estate (80% of loans), with two institutions accounting for half of domestic assets

Population ageing offset by immigration (foreign labour makes up 30% of the workforce)

RISK ASSESSMENT

Growth returns to normal

The exceptional performance in 2018 – which was largely due to the positive impact on foreign trade of the depreciation of the Swiss franc in 2017, and sports licencing revenues earned by FIFA in the lead-up to the World Cup – will not be repeated in 2019. In fact, growth is expected to revert to its usual low level, reflective of spare capacity, with external trade making a smaller contribution and domestic demand continuing to play a significant positive role. Accordingly, exports (66% of GDP) are expected to lose some of their vigour owing to a less favourable global economy and franc appreciation between May and the end of 2018. Conversely, imports (55%) will continue to be driven by brisk domestic demand. Export performances would be affected by a no-deal Brexit, since exports to the United Kingdom account for 6% of the total, excluding indirect exports viaGermany. A soft patch for the euro that would give the Swiss franc back its traditional safe haven role would, provided it were temporary, probably be countered by an intervention by the Swiss National Bank, even if the central bank’s foreign currency assets already exceed GDP. Household consumption (54%), meanwhile, looks set to continue to benefit from the increase in disposable income in a context of low inflation and a labour shortage, which will encourage wage growth, given the very low level of unemployment and reduced immigration since 2018. Against the backdrop of intensive use of production capacity and continued favourable financial conditions in connection with the negative key rates applied by the central bank, business investment in equipment, commercial and industrial buildings, and research and development should remain firm. However, it could stall if negotiations with the EU to adopt a new framework agreement prove unsuccessful. Civil engineering financed by the federation, cantons and municipalities should remain on track, with, for example, the construction of the Ceneri railway tunnel to complement the Gotthard tunnel on the Zurich-Milan corridor. Investment in rental housing could nevertheless decline given the downturn in permits and the increase in vacancies observed at the end of 2018.

Chemicals, pharmaceuticals, industrial and medical equipment (mechanical engineering, precision instruments, electrical and electronic equipment), engineering and tourism are all expected to perform satisfactorily due to their ability to cope with less supportive external economic conditions. Forestry, wood processing, printing and agri-food are likely to have a tougher time. Watchmaking, which has just emerged from a challenging period, is likely to be hurt by the Chinese and American slowdown. Retail trade is expected to grow modestly due to weaker competition from foreign supermarkets in border areas. Accordingly, the rise in corporate insolvencies observed in 2018 should be attributed primarily to the increased number of business start-ups in previous years.

External accounts in surplus

Switzerland has a massive current account surplus, which comprises a surplus in goods (7.2% of GDP in 2017), as well as in services (2.8%), the latter mainly generated by finance, licences, patents and tolls. The whole exceeds transfers from foreign workers (4.5%), which have surged as the number of foreign cross-border workers has risen to over 300,000. Even when trade in commodities (4.1%) is taken out, the surplus is still 5.4%. In addition, recurrent surpluses have made it possible to accumulate significant foreign assets to the point that Switzerland had a net external asset position equivalent to 135% of GDP in June 2018.

Solid public accounts

Under the fiscal rule adopted in 2003 by the federation and replicated by most cantons, the public accounts must be structurally balanced (in 2018, they showed a surplus equivalent to 1% of GDP). If the economic situation deteriorates significantly, the federal and cantonal authorities, based on a vote by the representative assemblies, would have access to significant fiscal stimulus capacity. Public debt is divided equally between the federation, on the one hand, and the cantons and communes, on the other. Its cost is extremely low, with zero or negative yields on bond issues maturing in ten years or less (November 2018). Net of claims held by general government, the debt is almost zero. Fiscal policy, which is slightly restrictive, will remain uncontentious.

The FDP-Liberal Party, the centre-right Christian Democratic Party and the conservative and nationalist Swiss People’s Party (SVP) will dominate the bicameral Parliament and the National Council (seven-member executive with an annual rotating presidency) until the next elections in October 2019. Immigration from the EU (the SVP is pushing for a new vote), transformation of the many bilateral agreements governing relations with the EU into a framework agreement, pension reforms (increase in contributions and federal funding) and reforms to bring corporate taxation into line with international commitments (new vote planned for 2019) will remain the main issues.

Last update : February 2019

Payments

Bills of exchange and cheques are not commonly used in Switzerland, due to prohibitive banking and tax charges. The stamp duty on bills of exchange is 0.75% of the principal amount for domestic bills and 1.5% for international bills.

Commercial operators are particularly demanding regarding the formal validity of cheques and bills of exchange as payment instruments.

Domestic and international payments are commonly made by bank transfer − particularly via the SWIFT electronic network to which the major Swiss banks are connected. SWIFT provides rapid and efficient means of processing of payments, at low cost.

Debt collection

The Swiss legal system presents technical specificities, notably:

the existence of an administrative authority known as the Enforcement and Bankruptcy Office (Office des poursuites et des faillites / Betreibungs und Konkursamt / Ufficio di esecuzione e fallimenti) in each canton, with several offices at local government level which are responsible for executing court orders. Their functions are regulated by federal law. Interested parties can consult or obtain extracts from the Office’s records;

a new, unified civil procedure code, created by a commission of experts and approved by the Federal Council, became effective in 2011. This code entailed the repeal of the 26 cantonal procedure laws which were hampering the efficiency of the judicial system. Nevertheless, lawsuits require the assistance of a lawyer who is familiar with the court organisation in the jurisdiction where the case is has been initiated, as well as with the language to be used in the litigation process (French, German or Italian).

Amicable phase

The debt collection process commences with the issuing of a final notice, preferably by recorded delivery (making it possible to accrue overdue interest). The notice requests the debtor to pay, within two weeks, the principal amount due, along with overdue interest calculated at the legal rate of 5% (unless otherwise agreed by the parties).

Legal proceedings

If payment is not forthcoming, the creditor can submit a signed and completed petition form (réquisition de poursuite) to the Enforcement and Bankruptcy Office. This Office then serves the debtor with a final order to pay within 20 days, effective from the date of notification of the petition.

While very easy to use by creditors, this procedure nonetheless permits debtors to oppose the order within 10 days of being served, without having to specify grounds. In such cases, without unconditional proof of debt to cancel the debtor’s opposition, the only recourse for creditors is to seek redress through a formal legal action.

Before commencing formal legal action, it is mandatory to proceed to mediation or conciliation before a Justice of Peace. This excludes disputes falling within the jurisdiction of the Commercial Court of Zurich, or cases where both parties have agreed to ignore these proceedings and the claim is higher than CHF 100,000.

Legal proceedings entail initiating a formal (and now unified) procedure, comprising written and oral phases, with the possibility of examining witnesses during a court hearing. These procedures can last from one to three years, depending on the canton.

Conversely, where a creditor holds unconditional proof of debt signed by the debtor (any original document in which the buyer recognises his debt – such as a bill of exchange or a cheque), he may request the temporary lifting of the debtor’s opposition (main levée de l’opposition), without having to appear before the court. This is a simplified procedure, which is quick and relatively easy to obtain, and in which the court’s decision is based upon the documents submitted by the seller.

Once this lifting order has been granted, the creditor has 20 days in which to refer the case before the judge to obtain the debt’s release (libération de dette) and subsequently obtain an executory order. Once the court hands down a final ruling, the Enforcement and Bankruptcy Office delivers an execution order or a winding-up petition (commination de faillite). This winding-up petition enables the creditor to send the court a request for bankruptcy. Upon receipt of this request, the court will fix a hearing and send a written notice to attend to both parties. If no payment is effected by the debtor and the creditor does not withdraw his request, the court will declare the debtor company bankrupt.

Either a court of first instance or a district court hears legal procedures. Commercial courts, presided over by a panel of professional and non-professional judges, exist in four Germanic cantons: Aargau, Berne, Saint-Gall, and Zürich.

Once an appeal has been lodged with the cantonal court, as a last resort for claims exceeding CHF 30,000, cases are heard by the main federal judicial institution: the Swiss Federal Court (Tribunal fédéral Suisse / Schweizerisches Bundesgericht / Tribunale federale svizzero), which is located inLausanne.

Enforcement of a Legal Decision

Domestic judgments are enforceable once final. The court typically awards compensatory damages and orders to seize and sell assets. Punitive damages are not granted.

Insolvency Proceedings

Restructuring proceedings

Restructuring proceedings (Nachlassverfahren) can be initiated either by the debtor or the creditor. The administrator takes the necessary measures to prepare for the creditor and court approval of the composition agreement. An inventory is then taken, where all assets are valued. Approval of the agreement requires the affirmative vote of a quorum of either a majority of creditors representing two-thirds of the total debtors, or a quarter of the creditors representing three-quarters of the total debt. Once approved, the agreement must be confirmed by the Court. It then becomes valid and binding on all creditors of claims subject to the agreement.

Bankruptcy proceedings

A company may be declared bankrupt by the court and placed into bankruptcy proceedings if a creditor has successfully requested this, following a debtor’s declaration that it is insolvent. The court will determine whether summary or ordinary proceedings should be applied, or whether bankruptcy proceedings will go ahead (if the assets are insufficient to cover the expected costs of proceedings). The Receiver then draws up an inventory. Summary proceedings are ordered if the proceeds of the assets are unlikely to cover the costs of ordinary proceedings. In this case, there are no creditors’ meetings and the bankruptcy office will proceed to the liquidation and realisation of the assets, without the participation of the creditors.

If ordinary bankruptcy proceedings apply, the receiver publishes a notice of bankruptcy instructing all creditors and debtors to file their claims and debts within 30 days. This notice invites creditors to a first meeting (where they may appoint a private receiver instead of the state bankruptcy office) and a creditors’ committee. A second meeting will be convened for the commencement or continuation of claims against third parties and to agree the method for realisation of the assets belonging to the bankruptcy estate.